How Skaltsis managed his money schemeThere appear to be questions about where some of the money has gone

Sunday

Jan 27, 2013 at 3:15 AMJan 27, 2013 at 9:17 PM

By Michelle Kingstonmkingston@fosters.com

DOVER — Nickolas Skaltsis was arrested on Thursday on 19 Class A felonies for operating what the New Hampshire Bureau of Securities Regulations is calling a Ponzi scheme.

How did he do it and what is a Ponzi scheme?

Thirteen investors, in which 11 have been identified, invested a total of $327,500 with the Dover businessman and civic leader between February 2011 and September 2012. During that time, Skaltsis issued 21 promissory notes.

According to information the bureau gathered, each investor knew Skaltsis purchased, rehabbed and resold distressed homes in Strafford County. Some of the investors considered Skaltsis a friend and put their trust in this real estate investor and businessman. He was active in the community, having served as the chairman of the school board in 2002, a member of the board of directors for Dover Adult Learning from 2009-2011 and a member of the McConnell Center Advisory Board.

Investors were told their money would go toward his work in real estate. Investors saw his previous work through tours around the county or by joining him to look through binders of photographs of his previous projects.

Of the 13 investors, two of them were told their money would not be going into a specific project, but used generally in the operation of Skaltsis’ Liberty Realty Trust. The rest of the investors were led to believe their funds would go toward acquiring, rehabilitating and reselling real estate.

Investors were promised anywhere from 4 to 24 percent interest within three to 12 months.

For example, former State Rep. Donald Andolina, who invested $20,000 with Skaltsis in Aug. of 2011, was promised 12 percent interest on his money, coming in through monthly interest payments and an overall payout in August of 2012. Andolina received all but one monthly interest payment and is still waiting for his payout.

Andolina said before he invested with Skaltsis, he asked many questions and prepared his own contract. Skaltsis told him not to worry about his investment because he had $1 million.

Every investment check during this time was first deposited into one of two of his personal accounts with People’s United Bank or Citizens Bank. These bank accounts were more often than not in the negative before the checks were deposited.

From there, Skaltsis would cash thousands of dollars within 30 days of receiving the money and also write checks to a firm he was associated with called Phoenix Asset Group, Inc. A few thousand dollars were also given to his wife, Lorraine, throughout the 17 months and the bureau’s forensic accountants also discovered personal purchases were made at numerous grocery stores, Walgreens and the Cat Hospital. There were also numerous occasions where Skaltsis would write checks to himself.

The bureau said they have no reason to believe the funds were used for the purchase or rehabilitation of property. Through a deeds search in Strafford County, the bureau found Skaltsis had not worked at all in 2011 or 2012.

Former Superintendent of Schools John O’Connor, who invested with Skaltsis in February 2011, said he sat outside of Skaltsis’ home throughout the summer, noticing his work trailer had not moved in months.

Instead, investigators claim Skaltsis was receiving checks, placing the money in personal accounts and paying off debt and using the money for personal gain.

“The use of new monies to pay old debts, the commingling of investor funds in a personal account with other investors funds, the conversion of investor checks to cash, and the evidence that Skaltsis convinced some investors to rollover their funds so he wouldn’t have to return their principals, are all hallmarks of a Ponzi Scheme,” the bureau stated. “Coupled with the fact that Skaltsis was heavily in debt and that very little to no business activity occurred while Skaltsis was raising hundreds of thousands of dollars in 2011 and 2012, the Bureau is confident that Skaltsis was operating a Ponzi Scheme.”

Only one of the 13 investors received all of their money back.

The bureau found that of the $327,500 raised, only $15,000 of principal has been returned to investors.

On top of the $312,500 in principal still owed, and unpaid interest, Skaltsis reportedly owes money to prior investors and is in debt from secured deals, personal loans, partnership deals, a defaulted mortgage and a prior judgment against him, bringing his total debts to more than $1.2 million.

FOLLOWING THE MONEY

Below is information from just one of the examples provided in the public statement from the bureau and the attorney general’s office:

June 21, 2011: Michael Zalansky invested $20,000 with Skaltsis, expecting 12 percent interest on his funds. His investment was for one year and was toward Skaltsis and Liberty Realty Trust. His investment was deposited into Skaltsis’ personal People’s United Bank account.

Before the investment, the account’s balance was negative $19.64.

June 29, 2011: Within eight days of the $20,000 deposit, the funds from Zalansky were depleted through cash withdrawals totaling $10,500, two checks to Phoenix for $5,400, a check for $1,458.33 to pay for Skaltsis’ mortgage on his personal residence and purchases made at Hannaford, PSNH, Comcast and Walgreens.

The balance in the People’s United Bank account was now sitting at negative $64.87.

There is no evidence, according to the bureau, that Zalansky’s money was used toward purchasing or rehabilitating properties.

July 8, 2011: Zalansky, along with his wife Judith, both invested $10,000 each, expecting 4 percent interest on their funds. Their investments were for three months and went toward Skaltsis and Liberty Realty Trust.

Between the two of them, they have now invested $40,000 with Skaltsis.

That $20,000 was also deposited into Skaltsis’ personal People’s United Bank account.

Over the next 20 days, the funds they invested were depleted through cash withdrawals totaling $3,250, a check to Phoenix for $2,500, a check for $1,4588.33 for his personal residence’s mortgage, a check for $12,000 to an individual to whom Skaltsis owed money from a prior real estate partnership deal that never transpired, according the bureau. There were also purchases made with that money at Hannaford, Walgreens and the Pet Doctor.

July 25, 2011: At this time, the balance in the People’s United Bank account was negative $51.58.

October 11, 2011: The Zalansky’s investments are now due.

According to the bureau, “Skaltsis convinced them to let their investments rollover and Skaltsis issued new unsecured promissory notes to Investor #3 and #4 with a slightly higher interest rate than the prior notes.”

There is no evidence that the $40,000 invested by the Zalansky’s were used for any purchase or rehabilitation of properties.

They never received a return of their investment principal for any of their investments. Interest payments ceased in October 2012.

WHAT HAPPENS NOW

Skaltsis was charged on Thursday with 15 felony counts of theft by deception and four felony counts of theft by misapplication.

The bureau’s administrative action filed Thursday includes a request that Skaltsis, Liberty Realty Trust, and Phoenix Asset Group, Inc. pay restitution to investors, pay the costs of the bureau’s investigation, pay an administrative fine, and be permanently barred from conducting securities-related business in New Hampshire.

He is currently at the New Hampshire State Hospital in Concord after attempting suicide by running a generator inside his vehicle on Oct. 12, 2012.

The court has allowed Skaltsis to remain hospitalized, but when discharged, his bail is immediately converted to $300,000 cash only.

According to Senior Assistant Attorney General of the Consumer Protection and Antitrust Bureau James T. Boffetti, if this is not posted, Skaltsis will enter Strafford County House of Corrections and await trial.

Skaltsis is to surrender his passport, sign a waiver of extradition and not have any contact with victims in the case. Skaltsis is also prohibited from engaging in any real estate transactions.

A probable cause hearing is scheduled for Feb. 1 at 1 p.m. at the Circuit Court in Rochester.

Under state law, the maximum penalty for each Class A felony is 7½ to 15 years in state prison. With 19 charges, Skaltsis could face up to 285 years in prison.

Boffetti urges anyone with information about this case to contact the Dover Police Department and step forward with information they think would be helpful in this ongoing investigation.